Estonia, a pioneer in the crypto realm, finds itself at a crossroads as it goes through the implementation of the MiCA regulation. Markets in Crypto-Assets Regulation (MiCA), a pan-European crypto regulation, aims to establish a harmonized legal framework across EU Member States. It sets the goal to encourage innovation while reducing the risks linked to crypto-assets. The MiCA regulation impact will touch all EU countries, including Estonian crypto-related businesses.
Unified Crypto Regulation Across Europe
The introduction of MiCA, expected to be fully implemented by spring 2026, will bring significant changes to the crypto landscape across the EU. Many companies are still figuring out what is MiCA and what impact it has.
The regulation aims to provide a level playing field for crypto service providers, similar to traditional financial institutions, allowing them to operate across Europe under a unified legal framework.
Benefit of Estonian Previous Crypto Regulation
Historically, Estonia has been a hotspot for crypto companies. At peak time there were around 2,000 registered virtual asset-related companies. However, concerns over anonymity, potential money laundering, and the influx of dormant companies led to a tightening of regulations starting in 2019.
The Estonian government, aiming to protect its reputation and financial system, sought to balance encouraging innovation and reducing risks. It led to much stricter crypto regulations that came into force with Estonia´s Money Laundering and Terrorist Financing Prevention Act.
In the current situation, these stricter rules are a benefit. Due to this, new MiCA regulations implementing will likely go easier, because many of the new requirements are already met. Also, the existing Anti-Money Laundering Directives will remain in force alongside MiCA.
What will MiCA regulation change for Estonian crypto businesses?
Even though strict crypto rules have been active in Estonia for quite some time, crypto-related companies still need to make numerous changes to meet MiCA EU rules. The regulation will come into force soon. Now is the right time to ensure your company falls into the new needed legislation. Full compliance is required approximately for spring 2026.
What will change?
The first considerable change is that existing licenses will become invalid, necessitating companies to apply for a new MiCA license. Also, the shift in regulatory oversight from the Financial Intelligence Unit (FIU) to the Financial Supervision Authority (FSA) in Estonia is noteworthy as well, aligning crypto services with other financial market participants.
MiCA introduces additional provisions, including the categorization of crypto-assets, stricter requirements for certain issuers, and the obligation to publish a crypto-asset whitepaper.
A notable feature is the establishment of a public register managed by the European Securities and Markets Authority (ESMA), enhancing transparency and accountability in the sector.
Furthermore, the regulation ensures consumer protection by enabling a 14-day right of withdrawal and imposing stringent penalties for non-compliance.
Some changes that MiCA regulation will bring to Estonian crypto businesses:
- License Reapplication: Existing crypto licenses in Estonia will lose their validity, necessitating businesses to apply for a new MiCA license.
- Regulatory Oversight Shift: The responsibility for issuing licenses and supervision will move from the Financial Intelligence Unit (FIU) to the Financial Supervision Authority (FSA) in Estonia.
- Introduction of New Services: MiCA will introduce new services related to crypto-assets. Such as advisory and portfolio management services, which will also require licensing.
- Whitepaper Requirement: Issuers of crypto-assets must prepare, coordinate, and publish a crypto-asset whitepaper, with penalties for providing false information.
- Consumer Protection: Consumers will have a 14-day right of withdrawal when purchasing crypto-assets.
- Public Register: A public register managed by the European Securities and Markets Authority (ESMA) will be created to list whitepapers of issued crypto assets and licensed crypto service providers.
- Penalties and Fines: MiCA brings forth new fines and penalties, which can potentially be substituted with local criminal sanctions.
- Own Funds Requirement: There will be changes in the content of the own fund’s requirement for crypto businesses.
MiCA regulation impact in conclusion
MiCA regulation aims to foster innovation, protect investors, and ensure financial stability. It is setting the stage for the continued growth and development of CASPs and the European crypto industry. The MiCA regulation impact will likely bring increased transparency and security, further boosting consumer confidence in the digital finance sector.
It applies to all EU member states and will also bring additional changes to the existing Estonian crypto legislation.
In implementing the changes in MiCA Regulation, Estonia has an advantage. Due to the previous strict regulations, current license holders are already somewhat compliant with some changes to come. It means that the transition to MiCA will likely go quicker and more hassle-free.
However, every crypto-related company needs to ensure they comply with MiCA regulations and start applying for a new business license.
